Showa Denko K.K., a chemical engineering company headquartered in Tokyo, Japan, has agreed to pay more than double its own market value to purchase its larger rival Hitachi Chemical Co., Ltd., The move will reportedly scale-up Showa Denko’s lithium-ion battery and advanced materials businesses, maintaining pace with Chinese rivals.
The company states that it has offered ¥964 billion ($8.8 billion) for all shares of the chemicals unit of Hitachi Ltd., one of Japan’s largest industrial conglomerates. The tender offer is expected to start around February at ¥4,630 a share.
The purchase would be Showa Denko’s largest on record and would boost the company’s revenue from lithium-ion automotive batteries and related materials — segments that are growing fast as carmakers compete to make more electric-powered vehicles.
“Chinese material manufacturers have developed a business that takes advantage of the economies of scale and Middle East material manufacturers have also been increasing cost competitiveness,” Showa Denko said in the statement. The company reported that it needed a top market share and more scale to remain a major global manufacturer.
To pay for the purchase, Showa Denko explains that it seeking a ¥295 billion loan from Mizuho Bank and will sell preference shares to the bank and to the Development Bank of Japan. Showa Denko’s bid is among several major deals announced by Japanese companies as the year comes to a close.